Land Transfer Tax and the First Time Buyer

October 14th, 2011 \\ Blog, Stephanie Stoute

Land Transfer Tax and the First Time Buyer

I have recently encountered a few misconceptions about the Land Transfer Tax and how it affects the first time home buyer.

Often the thought is that when you are purchasing your first home, you are exempt from having to pay any land transfer tax.  This assumption can often shock first time buyers when final closing comes around and you’ve got a substantial Land Transfer tax bill to pay.

Before you panic, don’t worry, first time buyers are eligible for some hefty rebates which can prove to be of impact on your purchase price and closing costs budget.  The maximum rebate in Ontario for the Provincial Land Transfer Tax is $2000.

Let’s look at some numbers to see how far that rebate can take you:

Purchase Price: $150,000

Provincial LTT: $1225

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Purchase Price: $250,000

Provincial LTT: $2225

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Purchase Price: $350,000

Provincial LTT: $3725

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Purchase Price: $450,000

Provincial LTT: $5475

An eligible first time buyer will have a full rebate on Provincial Land Transfer Tax charges if your purchase price is on or below $227,000.

Now, if you live in the City of Toronto you have most likely heard of the Municipal Land Transfer Tax, which also offers a rebate to first time homebuyers of $3725.  Here’s how the Municipal LTT equates:

Purchase Price: $400,000

Municipal LTT: $3725

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Purchase Price: $450,000

Municipal LTT: $4725

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Purchase Price: $500,000

Municipal LTT: $5725

We are only scratching the service of Land Transfer Tax and it’s impact on your purchase, so it’s important to take away that this topic is often misunderstood and is one that requires an in-depth conversation with your Realtor, Lender and Solicitor.

You can calculate both the Provincial and Municipal LTT on the Toronto Real Estate Board website

Other notables c/o the Ministry of Revenue (Ontario):

Land Transfer Tax applies to all transfers of land in Ontario.

First-time homebuyers may be eligible for a refund of all or part of the tax. For transfers where:

  • the agreement of purchase and sale was entered into after December 13, 2007, the refund applies to all homes, whether newly constructed or resale.
  • the agreement of purchase and sale was entered into before December 14, 2007, the refund only applies on the purchase of a newly constructed home.

Applications for a refund must be made within 18 months after the date of the transfer.

Who qualifies?

To claim a refund, you:

  • must be at least 18 years of age;
  • must occupy the home as your principal residence within 9 months of the date of transfer; and
  • cannot have ever owned a home, or an interest in a home, anywhere in the world.

In addition:

  • your spouse cannot have owned a home, or an interest in a home, anywhere in the world while being your spouse; and
  • in the case of a newly constructed home, where the agreement of purchase and sale was entered into before December 14, 2007, you must be entitled to a Tarion New Home Warranty.